The gap between Petrobras' fuel prices and international benchmarks $PETR3 (+0,46 %)
$PETR4 (+1,21 %) and international benchmarks has put the state-owned company under pressure in recent weeks. The market has the impression that the oil giant is sacrificing potential profits by waiting to adjust diesel and gasoline prices. On the other hand, raising prices now would increase pressure on the government, which is struggling with rising food inflation and growing public discontent. To make matters worse, diesel and petrol prices are set to rise on Saturday (01.02.2025) due to adjustments to the tax on the movement of goods and services (ICMS). The tax on petrol will rise by 7% to R$ 1.47, while diesel will increase by 5% to R$ 1.12.
Against this backdrop, the Petrobras Board of Directors met on Wednesday (29/01/2025) to review whether the company has complied with its current fuel pricing policy since May 2023. Although the Board of Directors does not decide on price adjustments, the context of the meeting is sensitive. Decisions on price changes are the responsibility of the Executive Board.
It appears that government officials close to the board believe that a price increase could be postponed for a few weeks if price assumptions remain within the established limits and if favorable economic conditions - such as a stable exchange rate and lower Brent oil prices - persist. The biggest challenge for Petrobras will be to convince the market that the fuel price increase can wait.
Petrobras' price gap with import parity has narrowed. StoneX estimates that Petrobras' diesel prices are R$0.36 below import parity, equivalent to 10.4%. The consultancy noted that this difference peaked at R$0.82 on January 20, due to currency fluctuations, expectations related to Donald Trump's policies and rising international prices due to severe weather in the US. Gasoline prices are R$0.17 or 5.9% below parity, according to StoneX.
The Brazilian Association of Fuel Importers (ABICOM) reports that Petrobras diesel prices are R$0.55 below international prices, a difference of 16%. On January 20, this discrepancy reached R$ 0.96, or 28%. Gasoline prices are R$0.24, or 8%, below parity, compared to R$0.42, or 14%, on January 20.
In a report, Itaú BBA stated that a possible diesel price increase would benefit Petrobras' stock performance if implemented. The bank estimates that the state-owned company's diesel prices are 10% below import parity, while gasoline prices are 8% below.
The oil giant has not adjusted diesel prices for over a year, with the last change - a reduction of 7.85% - taking place in December 2023. The last gasoline price adjustment was in July 2023, an increase of 7.04%.
On Monday (27/01/2025), the CEO of Petrobras, Magda Chambriard, met with President Lula, the Minister of Mines and Energy, Alexandre Silveira, and the Chief of Staff, Rui Costa, in Brasília. The meeting was not followed by an official announcement. However, according to g1 columnist Ana Flor, Ms. Chambriard hinted that Petrobras could raise diesel prices by R$0.18 to R$0.24 per liter in the coming weeks.
While fuel prices are causing debate, Petrobras' production remains robust. On Monday (27.01.2025), the company announced that it had achieved its oil and gas production targets set out in the 2024-2028 strategic plan. Total oil and gas production reached 2.7 million barrels of oil equivalent per day (BOE/D). Commercial oil and natural gas production amounted to 2.4 million BOE/d and oil production to 2.2 million barrels per day (BPD).
